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Year- End Tax Planning Strategies

Year- End Planning Strategies

As we approach the end of 2023, with tax season rearing its ugly head around the corner, it’s a great time to consider implementing tax-saving strategies to effectively reduce your upcoming tax obligations that will come due next April. Being proactive now can allow an opportunity to take advantage of this remaining time. It is also a good time to review your overall financial picture and assess the current financial situation. 

Below, we will explore potential year-end tax savings strategies as well as overall planning strategies that should be considered before year end. Make sure to contact your financial advisor to take the necessary steps before December 31st. 

Tax Planning Strategies- 

Reducing or deferring income to minimize net investment income tax (NIIT), qualifying for lower long- term capital gains tax rates, and reducing overall modified adjusted gross income (MAGI)

Taxpayers can minimize or entirely avoid the 3.8% surtax on net investment income by strategically deferring net investment income or using tax planning strategies to reduce their net investment income or reduce their overall MAGI. This NIIT surtax is applicable to MAGI exceeding specific income thresholds for various filing statuses. Reviewing a year-end tax projection can provide awareness of total MAGI for the year which can also be helpful when trying to avoid higher rates on Medicare Part B (Medical) and Part D (Prescription) costs.

Assessing your projected income for the year can help determine eligibility for a 0%, 15%, tax rate on long-term capital gains tax rates. The long-term capital gains rates increase at different income thresholds with 20% long term capital gains rates being the highest. Reviewing your expected income for the year can help you plan to try and benefit from lower capital gains tax rates.

If you are still under your retirement plan contribution limit for the year, consider maximizing your contributions to your 401(k), traditional IRA, Roth IRA, SEP, and Simple plans to reduce your taxable income. Individuals aged 50 or older should explore “catch-up” contributions to eligible retirement accounts. If eligible for an employer match in your retirement plan, make sure you have contributed enough to your retirement plan to maximum the amount of employer match received before the end of the year. 

Tax Loss Harvesting

Tax loss harvesting is a strategy used to reduce your capital gains tax, net investment income tax, and your overall modified adjusted gross income. This tax strategy is done by reviewing your taxable investment accounts before the end of the year and determining if it makes sense to sell any investments that are currently held at a loss. Once an investment is sold in a taxable brokerage account for either a gain or a loss the transaction will be reported on the taxpayer’s annual income tax filing. The taxpayer is allowed to offset any realized capital gains with realized losses. If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income. Any excess net capital loss can be carried over to subsequent years to be deducted against capital gains and against up to $3,000 of other kinds of income. This applies to all tax filing statues however If you use married filing separate filing status, the annual net capital loss deduction limit is only $1,500.

Roth Conversions

A traditional IRA to Roth IRA conversion is a strategic move that is often completed at the end of the year when the taxpayer has a firm idea on their total taxable income. Roth IRA conversions result in taxable income in the current year but allow for tax-free accumulation and distributions in the future. However, the additional taxable income from Roth conversions will have implications on adjusted gross income (AGI), modified adjusted gross income (“MAGI”, as discussed above), and state income tax should be carefully considered.

Donations to Charity

Donor-advised fund for charitable contributions offers multiple tax planning benefits. It allows donors to make a charitable contribution, receive an immediate tax deduction and then recommend grants from the fund over time.  Donors can contribute to the fund as frequently as they like, and then recommend grants to their favorite charitable organizations whenever it makes sense for them. Additionally, if the taxpayer is donating appreciated stock to the donor-advised fund, they will receive a fair market value of the donated stock as an income tax charitable deduction in the year donated and they will also not have to pay income tax on the unrealized gain from the donated appreciated stock.

For individuals aged 73 or older that are required to take a required minimum distribution, a Qualified Charitable Donation which is a direct transfer from an IRA to a public charity offers both a deduction for the charitable contribution made in the current year and also allows them to exclude the IRA distribution from their gross income.

Estate Planning Considerations

Consider annual gifting before the end of the year. The 2023 annual gift exclusion provides a valuable avenue for transferring wealth to future generations or facilitating tax-free transfers for education or medical expenses. This exclusion allows tax-free gifts of up to $17,000 per donee without affecting the lifetime gifting exemption.

This can also be a good time to review your estate plan. Updates involve a comprehensive review of wills, trusts, and related documents and also reviewing listed beneficiaries on retirement and brokerage accounts to make sure they are up to date. Leveraging the current federal estate, gift, and generation-skipping transfer tax (GSTT) exemption is advised, particularly before potential reductions in 2026.

Overall financial planning considerations

Given prevailing interest rates, individuals should review outstanding debt or contracts, contemplating refinancing or transitioning from adjustable-rate to fixed-rate loans.

Investment considerations include portfolio rebalancing, offsetting tax impacts of realized gains through tax loss harvesting, and exploring opportunities presented by the inverted yield curve and explore potential tax benefits of investing in opportunity zone funds.

Next Steps to consider

In conclusion, the year-end signifies a crucial juncture for individuals to implement strategic tax planning measures. It is highly advisable to engage with wealth, tax, and legal advisors to navigate these strategies effectively, aligning them with individual financial goals and circumstances. By taking a proactive approach, individuals can optimize their tax positions, paving the way for a more secure financial future.

If you are interested in a complementary meeting with us at Rose Wealth Advisors to see if you can benefit from any potential year end planning, please feel free to use the link below to schedule a meeting with us. You can also reach out to us at 201-961-4887 or email us at We look forward to speaking with you! 

Thank you for reading. I hope you found this information helpful.


Christopher D. Badaracco, CFP®, EA

Owner & Wealth Advisor at Rose Wealth Advisors 



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